Correlation Between China Asset and Shengtak New

Can any of the company-specific risk be diversified away by investing in both China Asset and Shengtak New at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining China Asset and Shengtak New into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Asset Management and Shengtak New Material, you can compare the effects of market volatilities on China Asset and Shengtak New and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in China Asset with a short position of Shengtak New. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Asset and Shengtak New.

Diversification Opportunities for China Asset and Shengtak New

-0.4

Correlation Coefficient

China Asset  Shengtak New

Very good diversification

The 3 months correlation between China and Shengtak is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding China Asset Management and Shengtak New Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shengtak New Material and China Asset is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on China Asset Management are associated (or correlated) with Shengtak New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shengtak New Material has no effect on the direction of China Asset i.e., China Asset and Shengtak New go up and down completely randomly.

Pair Corralation between China Asset and Shengtak New

Assuming the 90 days trading horizon China Asset is expected to generate 1.1 times less return on investment than Shengtak New. But when comparing it to its historical volatility, China Asset Management is 4.27 times less risky than Shengtak New. It trades about 0.17 of its potential returns per unit of risk. Shengtak New Material is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,430  in Shengtak New Material on October 2, 2024 and sell it today you would earn a total of  644.00  from holding Shengtak New Material or generate 26.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

China Asset Management  vs.  Shengtak New Material

China Asset Management

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Asset Management are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Asset sustained solid returns over the last few months and may actually be approaching a breakup point.

Shengtak New Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shengtak New Material has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Asset and Shengtak New

The main advantage of trading using opposite China Asset and Shengtak New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Asset position performs unexpectedly, Shengtak New can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Shengtak New will offset losses from the drop in Shengtak New's long position.

The idea behind China Asset Management and Shengtak New Material pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.